Last week it was art, aka the hefty price paid at auction for a Picasso, this week it was a further climb for the two main Chinese stock-indices, the Shanghai Composite and the Shenzhen Composite, ahead by a respective 8% and 12% on the week and by a staggering 44% and 94% year to date. However, cracks are appearing, as three Chinese stocks listed in Hong Kong defied gravity no more. Hanergy Thin Film Power Group Ltd, a solar module manufacturer, saw its shares suspended after a 1-day collapse of 47%, whilst investors’ of Goldin Financial Holdings Ltd and Goldin Properties Holdings Ltd took a 67% haircut over a two-day period. A common denominator for the companies is that they are controlled by single billionaire owners and valuations are ridiculously high, particularly the “Goldin companies” which traded at more than 130 times reported earnings before the collapse. The Hong Kong regulator declined to comment but either way events such as this damage investor confidence and perhaps the “Twin Peaks” warning provided a month ago is transpiring.

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